Looking to plug a projected $1.7 billion revenue shortfall for the coming fiscal year, Senate Democrats proposed a budget plan Wednesday that includes a 15 percent corporate business tax surcharge and a reinstatement of the so-called “millionaire’s tax,” a surcharge on those earning $500,000 or more annually.
The plan comes as a rebuttal to Gov. Chris Christie’s proposal of cutting a scheduled $2.25 billion pension payment to just $681 million.
Christie has previously vetoed the millionaire’s tax several times and has pledged to do it again if it hits his desk. Democrats, on the other hand, say that not fulfilling the state’s full pension obligations, as stipulated under bipartisan legislation signed into law during Christie’s first term, is unacceptable.
“Also a matter of fairness is that this plan will make the full pension contribution that the governor promised,” Senate President Steve Sweeney (D-West Deptford) said. “We must keep that promise. Staying true to the promised payments is also a matter of financial integrity. Abandoning the promise will cost more in higher interest rates and lower credit ratings.”
Under the proposed millionaire’s tax, a 10.25 percent tax would be placed on those earning between $500,000 and $1 million annually. Those earning more than $1 million would be hit with a 10.75 percent tax. Combined, the taxes look to net roughly $720 million in revenue, according to Sweeney’s forecast.
Another $375 million would be generated from a corporate business tax and $175 million from the suspension of BEIP grant payments for one year. Altogether, with other adjustments and measures, Sweeney’s plan would generate a projected $1.6 billion.
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“I don’t like raising taxes but the wealthy have benefited the most in recent years,” Sweeney said. “It is time to have them pay their fair share. This isn’t about punishing success, it is about basic fairness.”
Assembly Speaker Vincent Prieto said Wednesday that he was still reviewing Sweeney’s plan.
“The budget is a work in progress,” Prieto said. “Everything is on the table, as always. We will review the Senate plan.”
The Legislature has until June 30 to pass a balanced budget.
Senate Republicans railed against the Democrats’ plan, with Senate Minority Leader Tom Kean, Jr. (R-Westfield) adding that “budget negotiations should steer sharply away from dozens of tax and fee increases.”
Kean said a more viable alternative would be to shift $6.4 million from the clean air fund to the general fund and reduce spending for consolidation implementation, some Department of Education and Department of Human Services initiatives and spending for some hospitals and correctional facilities.
“New Jersey families know too well the negative impacts of raising taxes and fees, which we simply cannot support,” state Sen. Tony Bucco (R-Denville) said. “Our caucus will continue to do everything possible, especially when it comes to the budget, to keep the focus in Trenton on making New Jersey an affordable place to live, grow, work and retire.”
State Sen. Joe Kyrillos (R-Middletown) added that the Democrats’ proposal signaled an “all-time low.”
“If people think this shortfall is bad, imagine what happens when the highest percentage of taxpayers leave and take 40 percent of the state revenue with them,” Kyrillos said. “That means cuts to public services, pensions, benefits and the elimination of public jobs.”
Melanie Willoughby, New Jersey Business & Industry Association’s acting president, said that while members of both parties had been previously working together with the governor and the business community to come up with a solution, the Senate Democrats’ proposal “undermines those efforts.”
“New Jersey already has one of the highest tax burdens in the nation,” Willoughby said. “These tax increases hurt businesses of all sizes, make New Jersey less competitive and will cost the state tax revenues in the long run.”
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